Pessimism over the Biden Administration's policies and actions to get the economy back on track is starting to seep even more into the construction sector. The National Association of Homebuilders reported the confidence of homebuilders fell 12 points in July. That's the lowest it has been since the world virtually shut down in May of 2020 over fears coronavirus was going to wipe out billions.
Analysts say slow production, the rising costs of materials, and high inflation are causing many builders to halt construction. The cost of land, construction and financing exceeds the market value of homes. As a result, analysts say, the housing market is starting to give way a little, with builders reducing home prices to bolster sales and limit cancellations.
The organization’s Chief Economist, Robert Dietz, noted that affordability remains a critical issue for would-be buyers.
“Affordability is the greatest challenge facing the housing market,” Dietz said. “Significant segments of the home buying population are priced out of the market. Policymakers must address supply-side issues to help builders produce more affordable housing.”
The median price of a single-family home jumped 30% since the start of the coronavirus hysteria with mortgage rates at the end of 2020 well below 3%. Employment in the construction industry increased by a million workers in two years however, there is still a massive need to fill skilled positions.
Home construction starts fell in June from a year ago, by 6.3%. Construction on homes is at the lowest level since last September. That's a meager sign as economists actually expected housing starts to rise a little.
Building permits for new homes also fell in June.
Economists say the Federal Reserve’s current policy of raising interest rates to combat surging inflation is only going to make a full blown recession that much more likely. As rates have risen, that has made buying a house that much more expensive. The economy has consumer confidence down 32% from a year ago.
Tomorrow a report on existing home sales for June will be released.
Altogether, the reports should reflect a housing market that is cooling from its red-hot pace of 2021, but not yet rolling over.